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Below are Views On Inflation spikes back to 5.5% in Mar`21 and IIP shrinks 3.6% YoY in Feb`21 By Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services

Inflation spikes back to 5.5% in Mar'21 and IIP shrinks 3.6% YoY in Feb'21 Data points were largely on expected lines

-- As expected, retail inflation surged back to 5.5% YoY last month vis-a-vis 5% in Feb'21 and 4.1% in Jan'21. Core inflation also surged to 29-month high of 5.7% in Mar'21.

-- Food inflation (39% weight)  rose to 4-month high of 4.9% YoY in Mar'21, broadly in line with our forecast of 4.7%.

-- Separately, India's IIP contracted for third time in Feb'21 in the last four months - the worst fall of 3.6% YoY in six months. It was slightly worse than the market consensus of -3%, but not way off. Capital goods declined 4.2% YoY in Feb'21, while intermediate/infra sectors fell 7-7.5% during the month.

Overall, while both data worsened vis-a-vis previous month, there were no surprises. Going forward, CPI is likely to ease to <5% (7.2% in Apr'20) in Apr'21 and IIP could grow ~20% YoY in Mar'21 (-18.6% YoY in Mar'20) due to base effect.

On annual basis, CPI inflation/IIP is expected to average 4.7%/11.1% in FY22 v/s 6.2%/-8.7% in FY21. Above views are of the author and not of the website kindly read disclaimer

Above views are of the author and not of the website kindly read disclaimer